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Why Second Sight Medical Products, Inc. Is Tumbling

Second Sight Medical Products continues to lose money, despite an increase in sales.

Although we don't believe intiming the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What's happening: Shares in Second Sight Medical Products, (NASDAQ:EYES) dropped by 10% earlier today after announcing fourth quarter and full year earnings results last night after the market close.

Source: Second Sight Medical Products,

Why it's happening: The maker of vision-restoring prosthetics tumbled after it announced that its revenue totaled just $1.5 million and that it had a net loss of $13.6 million, or -$0.46 per share, in the fourth quarter.

The fourth quarter results lifted full year sales to $3.4 million, up nicely -- in percentage terms -- from the $1.6 million in sales it recorded in 2013. Revenue improved due to an increase in the number of implants of its Argus II retinal prosthetic last year. During 2014, the Argus II was implanted in 29 patients, up from 22 in 2013.

Second Sight also reported yesterday that its full year net loss increased to $35.2 million, or -$1.41 per share, from a net loss of $23 million, or -$1.02 in 2013.

Now what: Demand for Second Sight's Argus II is increasing; however, the addressable target market for this first-generation device remains small, and profit remains elusive.

The company is working on reimbursement deals with public and private payers, and the number of implants should increase again this year as the number of centers that are approved to do the procedure climbs.

Regardless, Second Sight is a highly speculative, early stage company that is still losing a lot of money. As a result, I'm content to watch and wait on this one, at least until we discover whether or not trials to expand the Argus II patient population succeed. If they don't, then my focus will shift to Second Sight's next-generation Orion device, which is advancing through its pipeline and could address more patients.

Author

Todd has been helping buy side portfolio managers as an independent researcher for over a decade. In 2003, Todd founded E.B. Capital Markets, LLC, a research firm providing action oriented ideas to professional investors. Todd has provided insight to a variety of publications, including SmartMoney, Barron's, and CNN/fn.
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